Economic benefits of regulations outweigh costs, OMB says

By Charles S. Clark

June 27, 2011

Cost-benefit analysis of major federal regulations over the past decade shows advantages outweighed expenses in most instances, according to the Office of Management and Budget's 14th annual report to Congress on regulatory costs.

In the first of this series since President Obama's January executive order requiring agencies to review existing regulations for excess burdens or obsolescence, the report put the total annual benefits "between $132 billion and $655 billion,while the estimated annual costs are in the aggregate between $44 billion and $62 billion." Ranges were used because of uncertainties resulting from evaluation methods and variations among agency missions.

"Most rules have net benefits, but several rules have net costs, typically as a result of statutory requirements," the analysis said.

The report, which has been required since 1997 and is mandated in the 2001 Regulatory Right to Know Act, examined annual benefits of major federal regulations promulgated from Oct. 1, 2000, to Sept. 30, 2010. It focused primarily on the Environmental Protection Agency and the Energy, Transportation, and Health and Human Service departments. The regulations analyzed include 66 created by the Obama administration in fiscal 2010.

Its recommendations to agencies centered on two themes:

(1) "Ensuring that regulation (including protection of public health, welfare, safety and our environment) is undertaken in a way that promotes the goals of economic growth, innovation, competitiveness and job creation; and

(2) Ensuring that regulation is evidence-based and data-driven, and hence based on the best available work in both science and social science (with full respect for scientific integrity)."

Rick Melberth, director of regulatory policy at the research and advocacy group OMBWatch, said the report's conclusion that agency rules carry more benefits than costs is "something the anti-regulatory faction ignores in their criticisms of regulations' impacts on the economy. This is especially true of clean air regulations from EPA, a major target of the critics," he said. The report "also highlights the overwhelming benefits of rules done by this administration versus Clinton and Bush over the same time frame" of some 20 months.

Melberth noted the report "raises doubts about the charges that regulations are a damper on the economy. The story is far more complex than that as all the academic work the reports cites makes clear," he said. "These are largely baseless charges made by anti-regulatory and anti-government factions -- those special interests and their allies in Congress."

The National Association of Manufacturers and the U.S. Chamber of Commerce did not respond to requests for comment by publication time.